The Federal Reserve Board eagle logo links to Board's home page

International Finance Discussion Papers
The International Finance Discussion Papers logo links to the International Finance Discussion Papers home page Bank Integration and Financial Constraints: Evidence from U.S. Firms
Ricardo Correa
2008-925  (March 2008)

Abstract:  This paper uses data on publicly-traded firms in the U.S. to analyze the effect of interstate bank integration on the financial constraints borrowers face. A firm-level investment equation is estimated in order to test if bank integration reduces the sensitivity of capital expenditures to the level of internal funds. The staggered deregulation of cross-state bank acquisitions that took place in the U.S. between 1978 and 1994 helps estimate the model. Integration decreases financing constraints for bank-dependent firms. The change in firms' access to external finance is explained by an increase in the share of locally headquartered geographically diversified banks.

Full paper(323 KB PDF) | Full paper (screen reader version)

Keywords
Bank deregulation, investment, financing constraints

PDF files: Adobe Acrobat Reader   ZIP files: PKWARE

Home | IFDPs | List of 2008 IFDPs
Accessibility | Contact Us
Last update: April 8, 2008